With the advent of data networks such as the Internet, World Wide Web, bulletin board systems, and commercial on-line services, electronic commerce has become one of the fastest growing segments of the economy. The most readily available form of commerce is the exchange of information to an end-user for payment. While these data networks are adept at disseminating information, collection of payment has been problematic—holding back the growth of electronic commerce.
Methods of collecting payment for information can be separated into two broad categories, on-line and off-line. On-line methods include the transfer of credit card numbers and the use of digital cash U.S. Pat. No. 6,029,152 off-line methods require the end-user to mail in cash or checks. These approaches can be cumbersome, time consuming and risky from a security standpoint.
Credit accounts are widely used for non-cash payments for goods and services. The authorized user of the account is issued a card and account number that can be used to charge purchases to the account. The credit card issuer, such as a bank, pays the merchant, and the cardholder then pays the card issuer. The issuer's revenues are received by charging a merchant a fee for each transaction, and charging the cardholder monthly fees and interest on unpaid balances.
U.S. Pat. Nos. 5,963,924 and 6,016,484 issued to Humphrey Williams et al. describes an electronic monetary system that emulates a wallet used for keeping money, credit cards and other forms of payment. Once a consumer has decided to make a purchase from the merchant, the application requests a user name and wallet password, display merchant and order information, request that a user select a payment instrument from the wallet. The payment instruments include credit cards, electronic checks, electronic money, electronic coin, debit card and smart cards.
However, transferring credit card numbers via the Internet, for example, carries the risk of theft from unscrupulous computer hackers and thieves, who can tap into a server connected to the Internet and search for messages containing 16 digit numbers. Recent events demonstrate that hackers are becoming more and more sophisticated, and it is only a matter of time before they are able to decipher encryption technologies designed to protect personal and financial information transmitted over the Internet Digital money systems (e.g. DigiCash, eCash, etc.) are presently a long way from practical implementation, with no standards having yet been established.
U.S. Pat. No. 5,970,478 issued to Jay S. Walker describes an apparatus, method and program for customizing credit accounts in exchange for a fee to be collected by the credit card issuer.
Payment systems which rely on credit cards (whether over the Internet or otherwise) also have an obvious limitation customers with bad credit may not qualify for a purchase. Besides, only consumers with credit cards can make purchases. Many potential customers may not qualify for a credit card for a variety of reasons, but may have adequate disposable income to make a particular purchase. Reducing the reliance on credit cards as a form of payment for Internet transactions will, therefore, increase the consumer base for e-commerce.
An added disadvantage to the use of credit cards is that transaction costs may limit their utility for low dollar value purchases. Vendors are discouraged from billing small amounts on credit cards because of the relatively high transactional costs as a percent of the sale. Irregular, short-term or single usage purchases over the Internet cannot be charged in an economical manner for either the supplier or the consumer. For example, if an information provider wanted to charge twenty-five cents to view a one time copy of a “top ten” list, the end-user obviously would not want to set-up a credit or cash account as the expense to establish such an account would exceed the value of the one-time information obtained (particularly when the user would have to divulge sensitive information in order to set up the account). The minimum practical credit card charge exceeds $2.50.
There are specific challenges associated with the disclosure of information over the Internet. There have been attempts to use existing telephone-based billing and collection systems. One example, is a 900-number-based billing system. However, the 900 system has several disadvantages, including among others, that it is cumbersome, difficult to use, and generally ineffective.
Moreover, all of the existing systems use codes that are simply passwords, and are limited to the particular data site for which they were issued. These codes do not represent “value” and therefore cannot be used to control or limit access to digital data.
A second major problem with existing systems is that they require the information site to be “intelligent” and able to store and maintain codes in order to know which codes are valid (e.g. when does a code expire). This greatly increases the information provider's cost for providing digital information and limits the number of information providers that can afford the additional overhead. Thus, these prohibitive cost reducing e-commerce and competition on data networks.
A third major problem with existing systems is that neither the data network nor the information providers are connected to the billing system. This severely limits their ability to provide even basic customer service to users of the system.
A fourth major problem with existing systems relates to the use of the 900 system itself. Information providers are limited as to the amounts charged for information. The 900-number system provider in existing systems offers no more than seven different dollar amounts they can charge on their 900-numbers. Each 900-number represents a different dollar amount charged to a consumer. For example, a 900-number system provider has three different 900-numbers, each corresponding to a different dollar value, $10, $15 and $20. An information provider using such a system for billing would be limited to those dollar amounts regardless of the value of the information they were selling. Additionally, the dollar charges cannot reflect the number of times a user, or multiple users, has had access to information, and the consumer is billed immediately for the 900-number call, even if they never receive the digital information.
A specific example of one such system is known as Web 900, offered by Logicom, Inc. In that system, the user calls a given 900-number, in exchange for which he is provided a code valid for a specified time period for unlimited access to a particular information site, and the information site locally verifies the validity of the code. There are several problems with this arrangement. First, there is no way to control access to the information by the number of uses. Users are forced to pay for unlimited access even if the user desires one piece of information or single use access. Second, since the data network has no way of preventing access to unauthorized users in possession of the code, the code could be posted to a BBS or newsgroup on the web, allowing for repeated uncontrolled use by anyone reading the posting. Third, the codes provided are usable only at a particular information site. A code provided for the purchase of five dollars worth of information at information site “A” cannot be used for the purchase of five dollars worth of information at site “B.” Finally, the data network must have the ability to store codes, and must have software to verify each code entered.
The most powerful barrier to e-commerce is consumer psychology. Given the sophistication of hackers, the severe personal and financial consequences of their activities and media attention on their activities, many consumers will never feel completely comfortable providing their credit card numbers over the Internet, even if the communications are ostensibly made secure. Given that time is at a premium, many of these consumers would consider making purchases over the Internet if their personal and financial information was not at risk. Finding a way to make the risk measurable and manageable would, therefore, encourage a significant number of consumers to start making purchases over the Internet.